New Oil Subsector ETFs Prove Refined

The latest offerings from State Street and iShares may make investing in the oil sector simpler.

In the flurry of new subsector ETFs , several energy-related products have hit the market. The old standby ETF for energy exposure not heavily weighted to Exxon Mobil ( XOM) has been the Oil Services HOLDR ( OIH).

Buying OIH, however, can prove problematic for some investors. As with all HOLDRs, its shares can only be bought in round lots of 100, and those shares trade around $150.

Those two factors could make investing in OIH too inflexible for some. Consider that energy makes up roughly 10% of the S&P 500, while oil services makes up only a quarter of the sector, as measured by the Energy Sector SPDR ( XLE). As a result, 100 shares of OIH may be too large of a bet for many investors, as the size of the investment could dominate a portfolio.

State Street Global Advisors and iShares have both recently rolled out funds that allow investors to more flexibly capture the exploration and production (E&P) and services portions of the energy sector.

Both the State Street and iShares products are so new that there is very little history to examine in this alphabet soup of ETFs, so let's take a broad look.

There is a lot of overlap in the funds. The two E&P vehicles share seven of their respective top-10 stock holdings. The State Street E&P fund does have small weightings in Exxon Mobil and Chevron Texaco ( CVX), while the iShares E&P fund avoids those mega-cap names. If you have energy exposure that includes those two companies, you may want to favor the iShares fund, IEO, to avoid duplication.